Can I Open A Retirement Account For My Child

Another good reason to open an ira for your child is that it s an.

Can i open a retirement account for my child.

It involves doing something for your adult children that few families have thought of. A child must earn their own income in order to open an ira. Best of all if that money is in a roth ira your child can enjoy that 57 000 gain without having to pay a dime in taxes. Only a parent or legal guardian can open an ira for a minor.

It covers just about anything your child can make from a w 2 job to babysitting or dog walking. You can t set up a retirement account for your child until he starts having an earned income. When you open a roth ira under your child s name the account works a bit differently than one you d open for yourself. A 529 plan would be a great way to save for college all earnings would be tax free and he would have the money for college costs.

However there s one caveat. As the custodian you the adult control the assets in the ira making all investment decisions until your child reaches majority age at which point they are turned over to them. However the contributions your child makes toward the roth ira can t exceed what he or. However as long as your kid meets eligibility requirements.

A non parent would have to be appointed as legal guardian to be able to open the account you also need a social security number for. As daniel joss cfp describes this provides you with a double benefit. Basically a child s roth ira is one that you act as custodian for. Instead of putting cash in their hands who knows what they might do with it you can make contributions directly into their retirement plans.

Firstly those contributions you make will grow over time multiplying as the invested money makes returns and become worth much more than just cash today. It is possible to open an individual retirement account ira for a child. So what exactly is earned income. For more information on how this works.

That income can include money earned from self employment work babysitting shoveling snow walking dogs mowing lawns for example or formal employment.